Binance.US Offers Bitcoin at $700 Premium, But Why?

Bitcoin has been trading at a premium of $700 on Binance’s US exchange for four days. However, analysts cannot agree on the underlying cause. They stand out in particular when it comes to the role of market makers and anticipation of regulatory measures.

Bitcoin price was $700 higher on Binance.US on Thursday, offering a unique arbitrage opportunity for traders. The cryptocurrency has been trading at a premium on Binance’s US exchange for four days.

Binance differentials

Currently, the price of one bitcoin is $28,000 on global markets, such as Binance’s global exchange. However, on Binance.US, one bitcoin costs $28,300, indicating a premium of $700. This additional cost represents approximately 2.5% of bitcoin’s value.

The premium only appeared on Saturday morning and has held ever since. This price difference has affected funding rates on other exchanges, including Bitmex.

Traders can usually profit from the difference in Bitcoin price between Binance.US and other exchanges by buying at a discount and selling at a premium. Binance and Binance.US are separate platforms to accommodate the US’s unique regulatory environment. They also offer different cryptocurrencies for trading.

Why the difference?

Traders have speculated on the gap, which is unusual in length. Some have suggested that this premium may be a result of market makers leaving Binance.US.

Market makers are institutional traders who provide liquidity on exchanges by creating buy and sell orders for a cryptocurrency using their own capital to make money. Departure from market makers can lead to reduced liquidity. This in turn can lead to price imbalances.

However, it may not be as easy to arbitrate in this particular case.

A Twitter user, @fewseethis, speculated that news of incoming regulatory actions might have scared them off. “IF there is some kind of government action against binance US incoming and market makers who usually do business there know about it, THEN it is possible they left and there is not enough liquidity and the opportunities for arbitrage are reduced.”

Although another Twitter analyst believes that the departure of the market makers did not explain the phenomenon.

– There do not seem to be any strong indications of that [market makers] leaving, said @_FabianHD. “Order book depth has not expanded significantly compared to other markets and total assets have been stable throughout the month.”

After looking at the top five market players on Binance.US, he concluded that there was “nothing out of the ordinary.” Outflows “do not appear to indicate a rush to exit the exchange just yet.”

Conor Ryder of Kaiko Data agreed, citing “no change in liquidity.” Speaking about Binance.US, he continued: “After those are the theories, mine is just more likely a BTC demand issue on an illiquid exchange struggling on the USD side.”